On January 1, 2013, Ameen Company purchased a building for $36 million. Ameen uses straight-line depreciation for financial statement reporting and MACRS for income tax reporting. At December 31, 2015, the book value of the building was $30 million and its tax basis was $20 million. At December 31, 2016, the book value of the building was $28 million and its tax basis was $13 million. There were no other temporary differences and no permanent differences. Pretax accounting income for 2016 was $45 million. The tax rate is 40%. The journal entry to account for the temporary difference will include

1.Dr Income Tax Expense 22

Cr Income Tax Payable 16

Cr Deferred Tax Liability 6

2.Net Income of Ameen in 2016 = $23

Explanation

1.Preparation of the appropriate journal entry to record Ameena 2016 income taxes

Calculation for Pretax accounting income

Pretax accounting income = $45

Less:Excess Depreciation as per tax = ($5)

($20-$13)-($30-$28)

$7-$5

=$5

Taxable Income = $40

Income tax for the year = 40 × 40%

Income tax for the year= $16

Calculation for Deferred Tax Expense for the year 2016

Deferred Tax Expense for the year 2016 = ($28 - $13) ×40%

Deferred Tax Liability= $15 ×40%

Deferred Tax Liability= $6

Calculation for Income Tax Expense

Income Tax Expense = $16 + $6

Income Tax Expense= $22

Therefore the appropriate journal entry to record Ameena 2016 income taxes will be:

Dr Income Tax Expense $22

Cr Income Tax Payable $16

Cr Deferred Tax Liability $6

2. Calculation for Ameen 2016 net income

Net Income

Accounting Income of Ameen = $45

Less: Total Tax Expense = ($22)

Net Income of Ameen in 2016 = $23

Therefore the Net Income of Ameen in 2016 will be $23

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typically a loft will include modern kitchen and bathrooms, this increases the price tag. lofts also have a good amount of open space, this requires more heating and electricity. lofts are also in older buildings, this means that maintaining the location increases the bill. keep in mind this is without talking about the high state and property taxes.

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